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Going International for the First Time. When to consider international expansion When to consider international expansion Checklist prior to launching.

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Presentation on theme: "Going International for the First Time. When to consider international expansion When to consider international expansion Checklist prior to launching."— Presentation transcript:

1 Going International for the First Time

2 When to consider international expansion When to consider international expansion Checklist prior to launching your international program Checklist prior to launching your international program Potential ways to enter foreign markets Potential ways to enter foreign markets Identifying which countries might be right for your brand Identifying which countries might be right for your brand Identifying and qualifying international Identifying and qualifying internationalcandidates Costly mistakes to avoid Costly mistakes to avoid

3 When Should you Consider When Should you Consider International Expansion? International Expansion? Being opportunistic versus realistic Being opportunistic versus realistic Franchising what you know Franchising what you know Integrate international development into Integrate international development into your business planning process your business planning process Ensure your domestic and international Ensure your domestic and international strategies complement rather than strategies complement rather than compete with each other compete with each other

4 Questions to Ask Before Committing to an International Development Strategy? Do we understand the commitment that is required in terms of time, resources and people? Is our product or concept well suited to international markets? Does our management team have any experience outside our home country? Questions to Ask Before Committing to an International Development Strategy? Do we understand the commitment that is required in terms of time, resources and people? Is our product or concept well suited to international markets? Does our management team have any experience outside our home country?

5 International Development Strategies A variety of options are available for A variety of options are available for international expansion, including; international expansion, including; – Direct entry via company-owned operations operations – Joint-venture relationship – Direct Single-unit franchising – Area development franchising – Master franchising

6 International Development Strategies International Development Strategies Joint-Venture Development Joint-Venture Development – High risk, moderate reward strategy – High risk, moderate reward strategy – Can be used to avoid foreign ownership restrictions or to acquire local knowledge within the ownership group – Can be used to avoid foreign ownership restrictions or to acquire local knowledge within the ownership group – Partner roles must be clearly defined – Partner roles must be clearly defined – Many joint-ventures fail – Many joint-ventures fail – Dissolving the relationship is often – Dissolving the relationship is often difficult difficult

7 International Development Strategies International Development Strategies Direct Single Unit Franchising Direct Single Unit Franchising – High degree of control – High degree of control – Difficult to recoup initial development costs related to entering the country – Difficult to recoup initial development costs related to entering the country – Challenge of managing many relationships from a distance – Challenge of managing many relationships from a distance – Challenge of implementing a cohesive brand – Challenge of implementing a cohesive brand Strategy across different markets – More difficult to negotiate in-country supplier – More difficult to negotiate in-country supplieragreements

8 International Development Strategies International Development Strategies Area Development Franchising; Area Development Franchising; – Allows greater direct control over unit-level quality – Allows greater direct control over unit-level quality – Can create a level of healthy competition – Can create a level of healthy competition – Fewer relationships to manage than single-unit franchising – Fewer relationships to manage than single-unit franchising – Ability to segment ownership groups by markets or regions within the local country – Ability to segment ownership groups by markets or regions within the local country

9 International Development Strategies International Development Strategies Master Franchising Master Franchising – Most common form of international development – Most common form of international development – Often over-used – Often over-used – Ideal for countries having larger populations or core markets which are geographically distant – Ideal for countries having larger populations or core markets which are geographically distant – Success is reliant on selecting the right master franchisee – Success is reliant on selecting the right master franchisee – Master franchisee should also operate locations – Master franchisee should also operate locations – Sub-franchisees could be area developers or single unit franchises – Sub-franchisees could be area developers or single unit franchises

10 Identifying Countries for Expansion Identifying Countries for Expansion Have you received requests from abroad? Have you received requests from abroad? What market criteria matter for your brand entry? What market criteria matter for your brand entry? How do you determine the ripe markets, what is the prioritization and at what rate do you plan to grow? How do you determine the ripe markets, what is the prioritization and at what rate do you plan to grow? Do your competencies match the target countries selection? Do your competencies match the target countries selection?

11 Identifying International Candidates Identifying International Candidates Potential International Franchisee Candidate Groups – Potential International Franchisee Candidate Groups – – Successful companies and groups particularly from these sectors Multi-Unit developers of other non- competing franchise systems Multi-Unit developers of other non- competing franchise systems

12 Considerations For Initiating An International Expansion Effort

13 Discussion Topics Discussion Topics Why International? Why International? When Is The Right Time To Expand When Is The Right Time To Expand Organizational Readiness Organizational Readiness Developing The Expansion Plan Developing The Expansion Plan

14 Global business & franchise map Number of businesses / franchise systems Number of businesses / franchise systems USA 15 million / 3700 UK 3 million / 750 Australia 1 million / 1200 China > 20 million? / 2000 India > 25 million? / 1000 Considerations Business know-how is valuable Capitalization strategy Economic opportunity for all Driver of employment Development of people National & international growth

15 GOING GLOBAL BUILDING A SERIOUS INTERNATIONAL BUSINESS KEY REASONS FOR FAILURE GOING GLOBAL BUILDING A SERIOUS INTERNATIONAL BUSINESS KEY REASONS FOR FAILURE Expanding an immature business Inappropriate business model Irrational country selection Ignoring market nuance Inadequate capital base Insufficient senior resource Inadequate start-up strategy

16 Going Global Going Global Building a Serious International Business Factor Immature Expansion ready Cash flow Weak position Strong cash-flow Capital Under-capitalized Capital readily available Systems and processes Under development Locked down Human resources Stretched Senior resources available Domestic growth Substantial remaining Exhausted

17 ORGANIZATIONAL READINESS ORGANIZATIONAL READINESS Mindset needed to truly plan a global expansion (CEO to Reception) Mindset needed to truly plan a global expansion (CEO to Reception) Education, preparation and planning paramount to your success…do not underestimate the amount of time this takes Education, preparation and planning paramount to your success…do not underestimate the amount of time this takes Understanding negotiations in different cultures Understanding negotiations in different cultures Profitable domestic operations Profitable domestic operations Strong franchisee validation Strong franchisee validation

18 Identifying International Market Opportunities Identifying International Market Opportunities

19 What Does Your Franchise Need To Succeed What Does Your Franchise Need To Succeed In the Diverse Global Franchise Market? In the Diverse Global Franchise Market? A business plan that focuses on the right markets for your particular franchise A business plan that focuses on the right markets for your particular franchise An assessment of the potential of these markets to produce a good Rate Of Return for your franchise An assessment of the potential of these markets to produce a good Rate Of Return for your franchise Clear differentiation from similar businesses Clear differentiation from similar businesses Documented training, support and marketing programs for your international licensee Documented training, support and marketing programs for your international licensee

20 Factors To Consider When Factors To Consider When Deciding Which Countries To Enter Deciding Which Countries To Enter Rule of Law Rule of Law Country Stability Country Stability Government Involvement Government Involvement Intellectual Property Protection Intellectual Property Protection Can you easily get your fees out? Can you easily get your fees out? Does the customer base fit your franchise Does the customer base fit your franchise Potential To Achieve An Acceptable ROI Potential To Achieve An Acceptable ROI

21 Strong International Franchise Sectors For 2010 Automotive – After market products and services Childrens Education – At all levels Commercial Services - Facility management, Cleaning, Handyman, Security Personal Services – Handyman, Maid, Mobile Retail – To fill large malls in emerging markets Specialty Food – Mall anchor concepts, special brands, ethnic foods, well known pizza brands

22 Strong International Franchise Markets For 2010/2011 The United States Brazil – Strong growth, high level of franchising China – Focused on 1st and 2nd Tier Cities India – Strong desire for food and retail brands Expected Growth Markets For Franchising in 2011 South Africa, Turkey, and Vietnam EU & Central Europe

23 Budgeting and Planning for International Franchising Budgeting and Planning for International Franchising

24 When should a company begin planning for international expansion?

25 WHEN A COMPANY HAS A CERTAIN LOCATION(S) PROFITABILITY NUMBER OF UNITS SIZE OF HOME MARKET GOOD PROSPECTS ARE AVAILABLE

26 WHAT SHOULD AN INTERNATIONAL FRANCHISE EXPANSION PLAN INCLUDE?

27 – specific countries? – specific countries? – regions? – regions? – markets near existing operations? – markets near existing operations? – well qualified franchise candidates? – well qualified franchise candidates? – markets where products offered by the franchise are most popular? – markets where products offered by the franchise are most popular?

28 Important Consideration: What portion of the marginal expense of entering a new foreign market should a franchisor expect to recoup from initial franchise fees?

29 How long should a franchisor expect to wait before breaking even on its investment in a new foreign market?

30 Elements of an international expansion franchisors sometimes overlook or undervalue

31 – market research to evaluate viability preliminary at execution stage – franchising strategy master area development joint venture unit – resources needed operational financial human

32 What resources are available to help franchisors plan for International expansion?

33 Budgeting and Planning Resources and Market Information IFA - US Commercial Services CIA World Fact Book Economist country briefings American Chambers of Commerce Local franchise and trade associations Prospective franchisees International banks Multinational suppliers Law and accounting firms International Council of Shopping Centers Consultants Budgeting and Planning Resources and Market Information IFA - US Commercial Services CIA World Fact Book Economist country briefings American Chambers of Commerce Local franchise and trade associations Prospective franchisees International banks Multinational suppliers Law and accounting firms International Council of Shopping Centers Consultants

34 What roles could international franchise consultants play in helping to develop and implement international expansion plans?

35 What process will you use to prepare a long range international budget in the following areas: – trademarks/legal – procedure manuals – translations – operational support – supply chain – equipment and furnishings

36 Sources cited for this presentation IFA 50 th annual convention, Feb Ned Lyerly, SVP - CKE Restaurants Kay Ainsley, MD - Michal H Seid Assoc. Kevin Derella, SVP – Coverall Health Based Sys. John Drig, President – Instant Imprints Carl Zwisler, Attny., - Gray Plant Mooty Rose Nichols Zimake, Intl Deve., - Dairy Queen William Le Sate, CEO – Le Sate Intl. Lee Vala, President, - Vala Interactive William Edwards, CEO – EGS, LLC Charlie Weeks, VP – Outback Steakhouse Rod Young, Executive Director, DC Strategies Jason Zickerman, CEO – The Alternative Board

37 Thank you


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